[WSBAPT] Community Property/Marital Trust Questions

[Diane J. Kiepe]

Natalie,

I have dealt with this issue several times and it would be difficult to explain by e-mail but I would be happy to chat with you on my approach.  The Limited Power of Appointment in favor of spouse has no bearing on Marital vs Bypass but, if the language allows for the Martial Trust to make varying QTIP elections you are going to want to consider (based on make up of other assets) a 100% Federal QTIP and 0% State QTIP since you have a filing requirement for the state anyway.

If you'd like to dialogue, let me know.

Diane J. Kiepe

Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA  99201
djkiepe at depdslaw.com<mailto:djkiepe at depdslaw.com>
509-455-5300

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Natalie Kuehler
Sent: Wednesday, June 22, 2022 5:52 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Community Property/Marital Trust Questions

Thank you!

Yes, all income to W; discretionary principal to W under HEMS standard.
Yes, the limited power of appointment is testamentary only, i.e. exercisable at death.

Does W still need to fund the Marital Trust with a full $3m, which will include part of W's IRA, or is there a way to get around that?

Natalie

Natalie N. Kuehler

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> on behalf of Philip N. Jones <pjones at duffykekel.com<mailto:pjones at duffykekel.com>>
Date: Wednesday, June 22, 2022 at 5:46 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Community Property/Marital Trust Questions
What are the other terms of the marital trust?  All income to W?  Discretionary principal to W under a HEMS standard?
Does the limited power of appointment apply only after W dies?  In other words, is it testamentary, exercisable at her death?
I believe that the marital trust can be used as a bypass trust.  Just don't make a QTIP election, except perhaps for the portion in excess of the Washington exemption.
Phil Jones


Philip N. Jones
Duffy Kekel LLP
900 S.W. Fifth Ave. Suite 2500
Portland, OR 97204
pjones at duffykekel.com<mailto:pjones at duffykekel.com>
(503) 226-1371 - office
(503) 853-1482 - cell
(503) 226-3574 - fax

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Natalie Kuehler
Sent: Wednesday, June 22, 2022 4:14 PM
To: wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Community Property/Marital Trust Questions

Hello all,

I am sure the answers to this are straightforward, but I can't seem to think this one through properly:

I have an estate that consists entirely of community property valued at $6m. Of that, $4m is held in IRAs, $3.6m of which is in an IRA in W's name only; the remaining $400k in an IRA in H's name only. The IRAs name the other spouse as a beneficiary. H dies, and in his Will leaves all of his interest in the couple's community property to a Marital Trust, the initial beneficiary of which is W. The Marital Trust contains a limited power of appointment for W (to H and W's daughter or charitable organizations only). This raises the following questions:


  1.  Does the limited power of appointment prevent treatment of the Marital Trust as a bypass trust for WA estate tax purposes?
  2.  Does the Marital Trust need to funded with $3m in assets (1/2 of all of the community property), or can it be funded with less? Specifically, can all of W's IRA stay in her name, or does a portion of that need to be transferred to the Marital Trust because that IRA alone makes up more than 50% of the community property? I am trying to avoid that result given the negative tax consequences that would be triggered.

Any pointers - or referrals - would be greatly appreciated.
Thank you!

Natalie


Natalie N. Kuehler
THE KUEHLER LAW FIRM PLLC
PO Box 3059 - 1112 State Route 20
Winthrop, WA 98862
o: (509) 996-2832 x1 - c (509) 557-5769
www.kuehlerlaw.com<https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.kuehlerlaw.com%2F&data=05%7C01%7Cpjones%40duffykekel.com%7Ca47176f77fc74bdfdddc08da54a542f4%7C2d66ed5354fa4c2f8c4dbff1aca5479d%7C0%7C0%7C637915366025551564%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000%7C%7C%7C&sdata=W1%2BphC2Y9Qm8YDNoxDwTczaER5ILvk9Q8te211et%2FIQ%3D&reserved=0>

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